The minutes of the May 2-3 FOMC meeting revealed uncertainty about how much more policy tightening may be appropriate, with some FOMC participants warning that a failure to raise the federal debt limit in a timely manner will threaten significant financial system disruptions and lead to tighter financial conditions.
Key Takeaways From The FOMC Meeting Minutes
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- The Committee unanimously decided to increase the federal funds rate by 25 basis points to a target range of 5 to 5.25% in May. The move was highly discounted by the market.
- Some participants stressed it was crucial that the statement not signal the likelihood of rate cuts this year or rule out further hikes, shifting to a data-dependent approach.
- The economic forecast prepared by the staff for the May FOMC meeting forecasted a mild recession starting later this year, followed by a modestly paced recovery.
- Fed participants highlighted that inflation continued to be elevated in March and is declining slower than they had expected.
- Concerning the regional bank tensions that arose after the failures of Silicon Valley Bank and Signature Bank, Fed officials believe the U.S. banking system is solid and resilient: "Deposit outflows from small and mid-sized banks largely stopped in late March and April."
- FOMC members anticipate that recent developments in the banking sector could likely result in tighter credit conditions for households and businesses, which would weigh on economic activity, hiring and inflation.
- Market Reactions: Stocks were weaker on Wednesday, with the SPDR S&P 500 ETF Trust (NYSE:SPY) losing 0.8% and the Invesco QQQ Trust (NASDAQ:QQQ) down 0.7%. Treasury yields moved higher for the day. The rate-sensitive two-year yield rose by 2 basis points to 4.34%, while the 10-year yield held steady at 3.7%.
- The dollar was the outperformer of the day among major asset classes, with the Invesco DB USD Index Bullish Fund ETF (NYSE:UUP) surging 0.4% for the session.
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Photo via Shutterstock.
27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.